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The spot price for 128Mb DRAM chips fell below $2 for the first time this week, and contract prices are below $3, Gartner Dataquest says.

This means most DRAM makers are selling at a loss, and they will continue losing money through to 2002.

It's been a rotten year for DRAM makers (but good news for customers) with prices falling 80 per cent so far in 2001.

In fact it's worse than rotten: the DRAM market will generate $14bn worth of sales in 2001 - less than half of 2000, making it the worst year ever for memory sales since the Dawn of Time. Or before.

Gartner Dataquest says the market is the worst ever -- sales are projected to plummet from projected to fall from $31.5 billion in 2000 to $14 billion in 2001. The last time there was a sales crash on such a scale was 1985 - and the causes are exactly the same - a "sudden decline in demand and increasing inventories".

"In 1985, it was the end of the home computer boom," Gartner Dataquest says. "Today, it is the slowing growth in personal computer shipments and inventory build-up that started in 2000."

Only one thing can save the DRAM industry from experiencing its worst ever year in 2001 - and that's production cutbacks by major manufacturers. So says Gartner analyst Andrew Norwood.

What's the betting on this? Price shake-outs in recent years has seen several DRAM makers exit the market. But not this time, Norwood reckons.

"In a situation like this, you would expect to see companies exiting the market, but the cost of quitting the DRAM industry is high, and what do you do with the spare fab capacity?"

Gartner Dataquest forecasts recovery "eventually", for the DRAM market. "2002 will be a transition year, with low growth returning to the market, but 2003 should see the strongest DRAM market growth since the early 1990s." ®